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Can China broker peace in Yemen?

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After nearly a decade of grinding conflict, Yemen looks to be inching toward a peace deal.

Talks between the Houthi movement controlling much of the country’s north and Saudi Arabia, the regional power backing an anti-Houthi coalition in the war, are ongoing and being encouraged by international observers.

On May 1, 2023, the US announced that it had sent Special Envoy to Yemen Tim Lenderking to the Persian Gulf to “advance ongoing efforts to secure a new agreement and launch a comprehensive peace process.”

But the US has far less of a role in steering negotiations than Washington’s great global rival: China. The recent breakthrough in Yemen has been undergirded by a rapprochement between Iran and Saudi Arabia, facilitated by Beijing in March 2023.

As an academic who specializes in US and Chinese strategic engagement across eastern Africa and the Middle East, I appreciate that the diplomatic breakthrough brokered by Beijing has implications for the region. It has the potential to reduce rivalries and strengthen stability in Yemen, along with other countries prone to sectarian violence, including Lebanon and Iraq.

But it has also led to speculation over China’s emergence as a major regional player in the Middle East. The development not only challenges the United States’ long-established dominance in the Gulf, but it also raises questions about Beijing’s strategic agenda and motives.

Fragmentation and regional dynamics

It remains to be seen whether the Saudi-Iran breakthrough might contribute to a lasting peace in Yemen.

But given the role that the rivalry between the regional powers has had in fueling the fighting, international observers have expressed optimism.

The disintegration of Yemen began with the collapse of its central government in 2011 after the Arab Spring uprising. In 2014, the Houthi group, a Shiite militia backed by Iran, took control of the capital, Sanaa, and forced transitional President Abdo Rabbu Mansour Hadi to flee to Aden.

Hadi’s government struggled to establish itself in Aden and eventually relocated to Riyadh, Saudi Arabia, where he resigned in 2022.

Map: The Conversation CC-BY-ND. Created with Datawrapper

Viewing the Houthis as an Iranian proxy, Saudi Arabia intervened in the Yemeni conflict, backing those loyal to Hadi and bombarding Houthi areas from the air. These Saudi-led attacks contributed to a massive humanitarian crisis.

The conflict has resulted in the deaths of at least 377,000 Yemenis, the United Nations projected in 2021, many through indirect causes such as starvation and disease. It has also led to widespread displacement of civilian populations and the breakdown of infrastructure.

The country remains fragmented, with militias controlling separate territories and no functional central government.

China’s path through Saudi Arabia

So where does China come in? Beijing has no formal diplomatic, economic or political ties with any of the numerous militias that currently govern parts of the country. But before 2014, China had a healthy trading and economic relationship with Yemen. According to the World Bank, in 2013 China was Yemen’s second-largest trading partner after Saudi Arabia.

Since 2014, trade between China and Yemen persisted, albeit in a mostly informal manner. Data from the international trade-tracking Observatory of Economic Complexity indicates that China imported US$411 million worth of products, mainly crude oil but also copper, from Yemen in 2021. What remains unclear is which rebel factions have received revenue through the trade.

Meanwhile, China has maintained formal diplomatic and economic ties with Iran, Saudi Arabia and United Arab Emirates (UAE) – each of which back militias involved in Yemen’s war. In fact, China has been intensifying its economic and political connections with all three regional powers.

In recent years, Chinese leader Xi Jinping has visited both the UAE and Saudi Arabia to underscore Beijing’s growing role as a partner in the region. Xi also recently hosted Iranian President Ebrahim Raisi during a state visit to China.

What’s to gain from peace?

This expanding relationship with key players in the Yemeni conflict puts China in a unique position as a potential peace broker. Yet uniting the three regional powers around a common peace plan has to date proved difficult.

The UAE can influence Yemeni factions it has provided military and financial support to, including the “Security Belt” forces affiliated with the transitional government. However, the Emiratis’ goals may differ from those seeking a unified, independent Yemen. Since the conflict broke out, the UAE has displayed a tendency to undermine Yemen’s territorial integrity through, for example, taking control of some Yemeni islands, such as Socotra.

Similarly, Iran may be reluctant to accept any peace agreement that would diminish its influence in Yemen. Tehran’s relationship with the Houthis has not been as consistently solid as some outside observers suggest, but ties have grown as a result of the conflict. Should hostilities cease, the Houthis’ military dependence on Iran would decrease, diminishing Iran’s leverage.

Saudi Arabia, of the three, stands to gain the most from peace in Yemen. Cessation of conflict would likely halt Houthi attacks on the kingdom, save the Saudis money and resources dedicated to the Yemeni war, and potentially restore an international reputation tarnished by alleged war crimes in the conflict.

Yemen’s Houthi loyalists chant slogans during a tribal gathering in Sana’a on February 20, 2020. Photo: AFP / Mohammed Hamoud / NurPhoto

To broker peace in Yemen, China would presumably need to concentrate efforts on working with the Saudis.

The Chinese-backed rapprochement between Saudi Arabia and Iran could be a first step to this end. Although no direct mention of Yemen is made in the language of the agreement, it does talk of both sides’ support for “the non-interference in internal affairs of states” and “keenness to exert all efforts towards enhancing regional and international peace and security.”

And since that agreement in March, there has been progress toward peace in Yemen. A Saudi delegation led by the kingdom’s ambassador to Yemen held talks with Houthi leaders in Sanaa on April 9. The talks were the first direct negotiations between the two sides on Yemeni soil since the war began in 2015.

The thinking in Beijing

But why is China invested in what happens in an ongoing conflict far from its borders – especially when it is already consumed with perceived strategic and military threats closer to home?

The argument that a cessation of hostilities in Yemen would grant China economic benefits by providing access to the Bab el-Mandeb Strait – a key strategic channel on the Arabian peninsula for commerce and trade, with an estimated 4% of global oil supply passing through it – ignores some critical factors.

Rebuilding a war-shattered Yemen and establishing a stable government may take time – and the investment required to do so might outweigh short-term economic gains.

Moreover, China already has a military base in Djibouti, giving it access to the Bab el-Mandeb Strait even without peace in Yemen.

It could be that China is seeking to be seen as a global peacemaker as part of a strategy that has been referred to as “diplomatic whitewashing” – that is, making friends overseas and playing the “nice guy” to distract from China’s treatment of its Uighur minority at home and Xi’s increasingly confrontational posture on Taiwan and the South China Sea.

But it also fits a wider geopolitical trend. The counterbalance to China’s growing role in the Middle East is the declining influence of the United States in the region.

Priorities in Washington have shifted to strategic concerns in East Asia and Ukraine, leading to a diplomatic opportunity for China – one Beijing is seemingly keen to exploit.

Meanwhile, US relations with Saudi Arabia have cooled, in part due to the Yemeni war. And Washington has had no formal diplomatic relations with Iran for decades.

As a neutral player, China can engage with Tehran and Riyadh in a way the US simply cannot. That was evident in China’s role in the rapprochement, and it could be the case in resolving Yemen’s war.

For China, it provides opportunities for another diplomatic success from which it could emerge as a reliable partner in a changing geopolitical landscape.

Mahad Darar is a PhD student of political science, Colorado State University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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New Qantas chief can’t charge sky-high prices forever

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After the epidemic and border closures shuttered much of the regional aviation industry in 2020, Vanessa Hudson will take over as CEO of Qantas Airlines in November. She inherits a company that is still having trouble getting back to operations.

The good news for Qantas is that it can impose higher tickets because of the airline’s increased demand for air travel. In the second half of 2022, it even managed to report a profit ofA$ 1.43 billion( US$ 963 million ).

But these circumstances didn’t persist. As Hudson, an officer who joined Qantas in 1994 and has been the company’s general business officer since 2018, deals with the extremely different short-term difficulties that come with recovery, she did increasingly need to focus on all the long-standing problems that existed for the Australian flagship airline prior to 2020.

Demand for air travel is recovering more quickly than provide for two main reasons.

The first is the time and effort required to return to service the plane that were parked at nearby interior airports and aircraft storage facilities during the pandemic. About 100 of Qantas’ 126 aircraft were put into storage, six aging Boeing 747s were retired, and the delivery of the new Airbus A321neo and Boeing 77 – 9 aircraft was postponed.

Airlines have never had to hold this numerous aircraft in the history of civil aircraft. Restoring them to support necessitates thorough construction inspections and tests. Just a small number of skilled protection personnel can prepare so many aircraft to resume flight.

Which brings up the second, more crucial problem: the need to replace positions.

The economy was dealing with a global lack of skilled aircraft even before the pandemic. Since borders were closed in 2020, it has been struggling to replace every employee, including the air and ground crowd.

Nearly a third of Qantas’ 30, 000 individuals were fired, including nearly 2, 000 ground crew members who were forced to retrench illegally. By the end of 2024, it hopes to hire almost 2,000 people, with a number of 8,500 by the year’s side.

A Qantas plane parked at Southern California Logistics Airport in Victorville, California, in December 2022.
In December 2022, a Qantas aircraft was parked at Victorville, California’s Southern California Logistics Airport. a flickr

Most people who have found work in various fields are never coming back. Some in the field worry that air is no longer a desirable profession. Additionally, all of the aircraft, flight technicians, and technicians who are being re-employed need refresher training before being allowed to work.

The whole air offer chain, including producers, is being impacted by labor shortages. On different aircraft shipments, Qantas is currently experiencing difficulties of around six months.

vying for clients

As Qantas struggles to keep up with demand, competition for clients will be a fairly small issue. However, this won’t take as airlines expand their ships and the current high cost of air travel starts to drop. For instance, at the end of 2022, tickets in the US market returned to their pre-pandemic quantities( in inflation-adjusted terms ).

I anticipate that Qantas may be dealing with many of the same competitive pressures that motivated its pre-pandemic cost-cutting and outsourcing by the end of 2023 or original 2024. It is partially attribute this to the service provided by the global government to airlines, which had the unfortunate side effect of fewer flight falls in 2020 than in 2018 or 2019.

While Qantas made a return for every year between 2015 and 2019, profit margins were very slim.

There is a lot of discussion about how the crisis permanently altered the air travel industry. For instance, company journey might never return. In February 2021, consulting company McKinsey predicted that the post-pandemic competition for business travel may be 20 % smaller.

The problem for Qantas and some airlines will be to arrange and adapt services appropriately while the jury is still deliberating on this issue and others.

In the long run, Qantas needs to lessen its economic impact.

The Carbon Offsetting and Reduction Scheme for International Aviation of the International Civil Aviation Organization has established a requirement that all foreign steam ships must set off the carbon emissions associated with airlines starting in 2027.

More often, stricter domestic economic requirements are very good as a result of the drive to decarbonize financial aviation.

Due to the airline’s comprehensive network of moderate and long-haul flights( which use more gasoline ) and aging, less fuel-efficient fleet, this will be more difficult for Qantas than rivals.

Even over 15 years old on average, more than twice as old as competitors like Singapore Airlines. Ships replacement will be a difficult task.

Volodymyr Bilotkach is Associate Professor, Purdue University

Under a Creative Commons license, this story has been republished from The Conversation. Read the original publication.

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Australia taking the measure of China’s cyber vulnerability

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Australia doesn’t need to rush ten or twenty years to launch effective military force against China with its original boats or long-range weapons. It is capable of using its digital forces to attack strategically important Chinese targets right away or to fend off that danger out of deterrence.

Cyberattacks are intended to break up or remove enemy military networks by breaking into their networks. They can be applied to a range of communication and weapon systems. Computer forces are now an essential component of a nation’s ability to strike during times of war. Even today, the United States is preparing to launch cyberattacks against China during a war, if necessary.

According to 2018 statistics, the Americans have a pressure of about 240, 000 protection personnel and contractors on hand to support both cyber defense and digital attack, with up to one-third of them probably available to do so.

These US attacks may be sustained across the complete range of Taiwanese war strength in the event of war. Gaining what is known as” decision dominance” would be the goal. If we can view Admiral Philip Davidson‘s remarks, which were made by the former chief of US Indo-Pacific Command, as a reference to China, this is the” disintegration” of Chinese systems and decision-making,” thereby defeating their offensive abilities.”

Australia has discussed digital act with much more caution than the US, but the two allies are closely allied. According to Project Redspice, which was unveiled last year, Canberra is currently tripling the size of its offensive cyber soldiers.

In the event of war, it was attack military command and control facilities whatsoever in China. Significant national equipment, like the energy network supporting the war effort, may be one of the softer targets.

Compared to the US, Australia’s computer force will continue to be modest. However, like the US, it can also request attack plans against China from corporate domestic or foreign corporations.

Australia wants to have cutting-edge net unpleasant options. Cyber services are carefully coordinated by the AUKUS supporters, and the new grouping places a lot of emphasis on this area of activity.

The certainty of AUKUS has significant ramifications for American security and sovereignty. Twitter, Screengrab, and Agencies

The National Cyber Force, an organization devoted to insulting fire operations, was established by the United Kingdom in 2020.

Australia’s cyber force will probably continue to be the most potent strike force against China for many years as a result of this” cyber three” alliance with the US and UK.

China’s vulnerability in computer protection

Of course, with cyberattacks, performance isn’t guaranteed. However, causing significant gap can be accomplished with a highly concentrated work across all stages of offensive cyber operations, particularly in collaboration with our allies.

The second phase, which involves ensuring up-to-date knowledge on the other side’s systems, is the most crucial. Even though the intelligence personnel aren’t considered to be playing an” offensive” role, the effort put into cyber intelligence against China’s armed forces serves as the basis for cyber offensive teams.

China is skilled at committing online crimes. Contrary to popular belief, China isn’t particularly strong in computer security, which makes it particularly vulnerable to attack during times of war. According to the International Institute for Strategic Studies, China has a number of fundamental flaws that may take years to address, such as those in its computer security sector, education system, and policy.

In terms of military computer capabilities, Chinese leaders have stated that they think they are far behind the US and its allies. Their decisions regarding starting a war over Taiwan will probably be constrained by this.

social inclinations

Australia shouldn’t be afraid of using this unpleasant power against China for political reasons because China intends to use it against us in the event of battle.

In advance of a serious issue, China is already conducting digital spying on Australia and other nations. It is almost certainly gaining the ability to, if necessary, remove foe military infrastructure and systems.

The long-held belief that Australia is contribute more to allied punishment of potential aggressors the more unpleasant capabilities it has, for example through submarines, was reportedly reiterated by Defense Minister Richard Marles.

The capabilities of Australia’s computer offenses are mostly kept in the dark. Photo: iStock

In the unlikely event of war, American political leaders does give the military’s capacity to attack Chinese targets on a large scale priority. Additionally, leaders must make sure that private digital industries are more potent and that digital forces have more highly skilled personnel assigned to this task.

The Australian Defense Force will also need to reevaluate the defense balance of power in the Asia-Pacific to take into account the US and its allies’ digital superiority over China in order for military and political leaders to proceed down this path more forcefully.

Australians may also feel more secure about potential Chinese military challenges as a result. Foreign leaders’ decisions to incite a crisis may be influenced by their perception that their armed forces aren’t being aggressive in this area of US and military military power.

Greg Austin is Adjunct Professor, Australia-China Relations Institute, University of Technology Sydney. This article is republished from The Conversation under a Creative Commons license. Read the original article.

Greg Austin has disclosed no suitable affiliations outside of their educational appointment and does not play for, demand, individual shares in, or get funding from any businesses or organizations that might profit from this article.

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Ukraine’s fate hinges on coming counteroffensive

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The war in Ukraine is approaching a tipping point.

Russia’s army has struggled to make meaningful advances after months of trying, and has still failed to capture the ruined town of Bakhmut. A persistent inability to establish air superiority, low troop morale and equipment shortages all suggest President Vladimir Putin’s military machine will soon be incapable of mounting meaningful offensive operations.

One key to successful military planning lies in reliably identifying new ways to derive the greatest strategic benefit at the lowest overall cost. Ukraine’s decision to vigorously defend Bakhmut is an excellent example of this, even though it runs contrary to the logic that there was little strategic value in doing so.

By throwing its own forces into Bakhmut, Ukraine has tied up a large proportion of the Russian military, inflicting heavy losses. Its approach is both a strategy of corrosion – the gradual attrition of the invader – and absorption, soaking up repeated Russian assaults while taking the pressure off other parts of the conflict zone.

This has led to several important payoffs for Ukraine. First, Moscow’s commanders have been unable to shift forces to another axis of advance. Second, the loss of personnel and material means fewer bodies and less equipment available for Russia to prosecute its war of aggression.

Third, it has created a buffer to construct Ukrainian defensive fortifications once Bakhmut finally falls. Finally, it has bought time to train and equip its forces for its own counteroffensive operations.

When, where and how Ukraine goes on the counteroffensive represent the most crucial decisions President Volodymyr Zelensky will make about the war so far. Ukraine’s own vulnerabilities mean no obvious answers reveal themselves, and whatever Zelensky decides will carry significant risk.

Timing is everything

One of the most important considerations is timing. Ukraine’s forces will want to advance under optimal conditions to liberate as much of its territory as possible before winter closes in again (winter makes ground operations, resupply and air support much more difficult to sustain).

Failure to do so will not only weaken Kiev’s hand in any peace negotiations, but also potentially leave large swathes of Ukraine under Russian control for the foreseeable future. Russia’s forces are aware the strategic momentum will shift once Ukraine counterattacks, and have been constructing deep networks of tank traps, trenches and other defensive fortifications to arrest its momentum.

Taken together, these would suggest a counteroffensive sooner rather than later. Why wait until both the weather and the enemy conspire to stymie your attempts to liberate territory, especially when Russia is better placed to prosecute a lengthy war?

Russian troops on a winter reconnaissance exercise. Photo: Wikimedia Commons

But that ignores even more crucial considerations around Ukraine’s capabilities, and its prospects for realizing its war aims, which have pushed the timeframes out.

Put simply, it’s absolutely crucial for Ukraine that its counteroffensive succeeds. If it doesn’t, the international coalition that has kept Ukraine in the fight with arms, training and aid may well come to favor a negotiated settlement.

Domestic politics will inevitably play a role in shaping the United States’ thinking as its election season gains momentum. While both sides of US politics are fairly solidly behind Kiev, that may change.

Indeed, the surest way to encourage US populist isolationists will be a stalled Ukrainian advance. And since a multinational coalition is only as strong as its weakest link, Ukrainian planners will likewise be anxious not to give Berlin or Paris cause to waver.

Wherewithal, not just will

Besides the need to maintain international support for full restoration of Ukrainian sovereignty, planning for offensive operations rests fundamentally on Kiev’s ability to conduct them.

Attacking is far more costly than defending. A counteroffensive launched before Kiev had the chance to recruit, prepare, arm and assemble the necessary personnel would peter out quickly. Such a failure would be a harsh blow to Ukrainian morale, hand momentum back to Russia, and lead to a pointless loss of life.

Counteroffensives, therefore, require the right kind of capabilities to increase the chances of success. Much of the public discussion about Ukraine’s war needs has centered on tanks and air power. Of course, these are very important, yet neither can actually hold territory. For that, you need ground forces – and lots of them.

What’s more, many of the likely lines of Ukrainian advance will feature choke points and vulnerable terrain. The retreating Russian army can be counted on to use mines, ambushes and scorched earth tactics to funnel viable routes for the Ukrainians into impenetrable and risky ones. That means Ukrainian forces will also need specialized equipment and personnel, from bridging units to those specializing in clearing terrain.

As their forces advance, Ukraine’s armored vehicles will require refueling and logistical support, and its army will need regular resupply of food, aid and ammunition. All those will need to be mobile to keep the counteroffensive going. The capability for aerial resupply of Ukrainian forces that penetrate deep into Russian-annexed areas will need to be developed too.

What’s more, re-establishing control over liberated territories will require significant planning to provide humanitarian supplies, shelter, medical care and public administration – not to mention security against any Russian forces left behind to cause chaos.

Scope and location

As to where the Ukrainian counterattack will come, a common view is that it’s most likely to occur around Zaporizhzhia in the southeast (made famous by its regularly besieged nuclear power plant). But war is about trying to gain strategic surprise, which Ukraine’s armed forces have shown themselves to be adept at.

Before the counteroffensive starts we should expect a variety of Ukrainian feints, probes, and “shaping” the battlespace – essentially, the use of tactical, strategic and political instruments to turn the situation on the battlefield to one’s advantage.

Finally, the status of Crimea in Ukraine’s plans deserves some attention. It will remain one of the thorniest problems in the war’s eventual resolution. The official position of the Zelensky government is clear: there can be no peace with Russia until Ukraine is fully restored, which includes the Crimean peninsula seized by Russia in 2014. This is understandable.

Any hint of willingness to concede territory signals weakness domestically, to the Kremlin, and internationally.

Importantly, Ukraine retains agency. It will ultimately decide on the scope and location of its counteroffensive. But several factors make Crimea a potentially special case. It’s well-defended and hard to assault. There are only about ten roads linking the peninsula to Kherson province.

It’s home to the highest concentration of ethnic Russian (and Russia-leaning) people in Ukraine. And Western supporters of Ukraine remain concerned that Putin’s deep personal and political investment in Crimea would make a Ukrainian attempt to recapture it one of the Kremlin’s “red lines” for further escalation.

Vladimir Putin appears larger than life on screen as he addresses an audience at the Luzhniki Stadium in Moscow on the eighth anniversary of the annexation of Crimea in March 2022. Photo: Vladimir Astapkovich / Sputnik

The lead-up to Ukraine’s imminent counteroffensive has so far been patient and careful, focusing on developing the best chance of operational success. With more than a year of evidence, we can expect Ukraine’s armed forces to perform better than their Russian adversaries.

Time and again, Kiev’s approach has been nimble, creative and efficient given limited means. Ukraine’s commanders have also sensibly followed the maxim of not interrupting your enemy while they are making a mistake (perhaps the sole thing Russia’s forces have excelled at).

But the stakes for Ukraine are no less than its national survival. The success or failure of its attempt to take back its territory will determine whether its future will revolve around rebuilding a damaged but restored state, or the pain of fashioning an existence in a shattered and partial one. And the repercussions outside Ukraine will be no less solemn, teaching dictators either that expansionism is rewarded or that it’s a catastrophic mistake.

Matthew Sussex is Fellow at the Strategic and Defence Studies Centre, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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To avoid a Ukraine quagmire, study the Iraq War

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Early in April 2023, Pentagon documents that were leaked revealed that the US is reportedly monitoring Russia’s intelligence operations and spying on Ukraine, giving its presence in the conflict in Ukraine a new dimension.

The documents reveal that the US continues to support Ukraine with military knowledge in addition to money and weapons against the Soviet invasion, even though it has never actually declared war on Russia.

The conflict between Ukraine and Russia and US presence have no clear end in sight. The US has participated in wars as a third party before, but this incident specifically brings to mind the Iraq War.

From the perspective of US foreign policy, the Iraq and Ukraine war differ significantly. In particular, thousands of American soldiers died fighting in Iraq, whereas the US has no ground forces there.

However, analyzing the Iraq War and its protracted aftermath can really aid in expressing worries about the United States” involved in extreme violence in another distant place.”

Below are three important things to know.

1. Success is not guaranteed by action.

Osama bin Laden, the rich Saudi Arabian Islamist who planned the attacks on September 11, 2001, was still at large when former US President George W. Bush declared the US had invade Iraq in 2003.

Although not directly related, bin Laden’s continued evasion of the US fueled a public resentment of hostile governments. Saddam Hussein in specific disobeyed the US and its supporters.

The Syrian authoritarian continued to avoid inspections by the International Atomic Energy Agency, a UN watchdog organization, giving the impression that he was in possession of WMD. As the cat-and-mouse sport continued, this infuriated the US and its allies.

According to reports, Bush was very worried that Saddam would attack the US with alleged WMDs, causing more damage than 9 / 11 did.

Iraq was invaded in March 2003 by a coalition of nations led by the US that also included the United Kingdom and Australia. As it came to be known, the” coalition of the willing” quickly triumphed and overthrew Saddam’s government.

Immediately following the invasion, Bush experienced a rise in social guidance, but as the war dragged on, his polls began to decline.

However, the US demonstrated a poor idea of the politics, world, and other significant facets of its own country that it had taken the initiative to occupy and then attempt to recover.

The Syrian Army’s disbandment in May 2003 was one of many decisions that revealed poor judgment and sometimes outright knowledge. With the abrupt departure of Kurdish security forces, there was a severe civil unrest.

2003: US Army troops in Baghdad. Photo: Commons Wikimedia

When the army was disbanded, rebellious violent soldiers emerged into the available. A civil war broke out in 2017 as a result of the fighting between various Kurdish groups getting worse.

Iraq is still politically unbalanced today and is no closer to becoming a republic than it was prior to the invasion.

2. 2. Specific grudges cannot support a war.

Saddam led an extravagant style during his 24-year rule, oppressing civilians and political rivals. In Iraq, he committed murder against Kurds. After being captured by US soldiers in 2006, Saddam was soon put to death by his own men.

Putin is even more serious and well-known. He has a lengthy history of violently oppressing his men, and he benefited from being in charge of one of the most corrupt governments in the world.

Additionally, he is in possession of weapons of mass destruction and has repeatedly threatened to use them against other nations. Additionally, US political leaders have directly targeted Saddam and Putin. It was clear well before the US entered the Iraq and Ukraine war that they were fixated on overthrowing these strange foes.

The United States’ support for Ukraine is natural given that it is engaged in a protective conflict that has resulted in horrifying civilian casualties. Supporting Ukraine also makes sense from the perspective of US regional security because it aids in retaliation against an interventionist Russia that is becoming more and more China-aligned.

However, I also think it’s crucial to keep US interest in this conflict within national interest.

3. It might split the nation.

The US’s serious politics over foreign policy increased as a result of the Iraq War. Additionally, current surveys of public opinion regarding the Iraq War reveal that the majority of Americans do not believe the war made the US any safer.

Today, the US is dealing with growing social reluctance to join the Ukraine battle, another costly overseas commitment.

According to surveys conducted in January 2023, more Americans believe the US is giving Ukraine too many aid in recent months. According to Pew Research Group, about 26 % of American adults believed that the US was over-investing in the Ukraine war in late 2022. However, the US employment was still supported by three-quarters of those polled.

The typical American has little to no knowledge of either Iraq or Ukraine. When US guidance for international wars increases in price and the threat of retaliation, especially through the use of tactical nuclear weapons, remains a chance, patience can probably run out.

Guide to Ukraine is probably going to get involved in the quickly intensifying conflict in Washington over the debt sky.

A combat-ready Russian guy. US Department of Defense image

On the other hand, adversaries like Russia, China, and Iran might feel motivated to act aggressively elsewhere if the US does not provide Ukraine with enough support to fight off Russian attacks and restore its independence.

The relation between the war in Iraq and Ukraine, in my opinion, makes it abundantly clear that the US administration should be very clear about the fundamental objectives of its national security to the American people when deciding how much and what kind of support it will provide to Ukraine.

Although most people think that Ukraine should be supported in its fight against Russian aggression, the Iraq War serves as a warning that original plan should not disregard the past.

Patrick James is the Dornsife dean’s professor of international relations at USC Dornsife College of Letters, Arts and Sciences.

Under a Creative Commons license, this article is republished from The Conversation. read the article in its entirety.

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How Twitter brought down Silicon Valley Bank

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Due to Silicon Valley Bank’s March 10, 2023, crash, investor discussions about the institution spiked on Twitter, which fueled the SVB banks run. These tweets also caused some financial institutions with poor balance sheets to collapse, as we explain in our latest working paper,” Public media as a lender run catalyst.”

The bank’s stock ticker,” SIVB ,” was mentioned in a significant number of tweets on March 9 around 9 am EST. Before posts mentioning” SVB” or” Silicon Valley Bank,” which were aspect of a more general-interest word, started, it had been about 2.5 years.

The rapid decline in the company’s share price on March 9 coincided with that spike in trader tweets, which persisted in after-hours trading and before the market opened the following morning. On March 10, the day the bank failed, trading in SVB’s property was halted.

We categorized US businesses, along with a number of other acquaintances, based on the volume of tweets that were sent about them and their susceptibility to potential bank runs.

We multiplied loses the bankers incurred as a result of the series of interest rate increases that started in March 2022 by the percentage of their payments that were below the Federal Deposit Insurance Corp. ‘ s security cap of US$ 250, 000 per account to determine risk.

We discovered that in March, stock of banks with significant Twitter engagement in January and February experienced significantly greater declines. The collection of institutions that were most vulnerable experienced a stronger impact. First Republic Bank was one of them, but it failed on May 1.

The one-third of businesses with the most posts saw drops in their share prices that were, on average, around twice as large as those of the other businesses when we examined what happened to the assets of all those with susceptible balance sheets between March 6 and March 13.

Why is it important?

Social marketing may have contributed to Silicon Valley Bank’s death, according to US politicians.

The Great Depression-era bank crisis is primarily responsible for the current understanding of bank functions. Back again, panic among banks customers was spread by word-of-mouth, media coverage, and social signals like lengthy lines outside of banks.

For US businesses, Silicon Valley Bank’s problems may be the tip of the iceberg. Screengrab, Twitter, and TechCrunch images

Since traditional media outlets primarily rely on one-way transmission from legal resources to the general public, the size of the reader and the quick spread of ideas set social media apart from newspapers and broadcast message.

Banks will undoubtedly continue to be concerned about this, especially in light of the problems that some financial institutions are currently experiencing.

What additional research is being conducted

Many of the ideas we raised in our documents were emphasized in a statement on SVB’s loss that the Federal Reserve released on April 28. It highlights SVB’s poor risk management and a sizable portion of Silicon Valley startup neighborhood savers, who are frequently very energetic and well-connected on social media.

Another group of academics, under the direction of Itamar Drechsler, a finance professor at the University of Pennsylvania, found that the subsequent rise in insured deposit accounts may weaken banks.

The development of perfectly modern businesses and mobile banking apps may increase this risk even more, according to ongoing research from a team of researchers at Columbia University and the University of Chicago.

What is unknown

According to reports, lenders who quickly withdrew money from SVB already used telephone calls, group email messages, Slack, and WhatsApp to express their worries.

However, since there is no content that is readily available to the public, it is difficult to determine what part those some, less formal dialogues played in causing the SVB bank run.

Tony Cookson is Associate Professor of Finance, University of Colorado Boulder and Christoph Schiller is Assistant Professor of Finance, Arizona State University

Under a Creative Commons license, this story has been republished from The Conversation. read the article in its entirety.

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First Republic collapse signals wider US bank ills

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First Republic Bank became the second-biggest bank failure in US history after the lender was seized by the Federal Deposit Insurance Corp. and sold to JPMorgan Chase on May 1, 2023. First Republic is the latest victim of the panic that has roiled small and midsize banks since the failure of Silicon Valley Bank in March 2023.

The collapse of SVB and now First Republic underscores how the impact of risky decisions at one bank can quickly spread into the broader financial system. It should also provide the impetus for policymakers and regulators to address a systemic problem that has plagued the banking industry from the savings and loan crisis of the 1980s to the financial crisis of 2008 to the recent turmoil following SVB’s demise: incentive structures that encourage excessive risk-taking.

The Federal Reserve’s top regulator seems to agree. On April 28, the central bank’s vice chair for supervision delivered a stinging report on the collapse of Silicon Valley Bank, blaming its failures on its weak risk management, as well as supervisory missteps.

We are professors of economics who study and teach the history of financial crises. In each of the financial upheavals since the 1980s, the common denominator was risk. Banks provided incentives that encouraged executives to take big risks to boost profits, with few consequences if their bets turned bad. In other words, all carrot and no stick.

One question we are grappling with now is what can be done to keep history from repeating itself and threatening the banking system, economy and jobs of everyday people.

S&L crisis sets the stage

The precursor to the banking crises of the 21st century was the savings and loan crisis of the 1980s.

The so-called S&L crisis, like the collapse of SVB, began in a rapidly changing interest rate environment. Savings and loan banks, also known as thrifts, provided home loans at attractive interest rates.

When the Federal Reserve under Chairman Paul Volcker aggressively raised rates in the late 1970s to fight raging inflation, S&Ls were suddenly earning less on fixed-rate mortgages while having to pay higher interest to attract depositors. At one point, their losses topped US$100 billion.

Paul Volcker in a file photo. Image: Twitter

To help the teetering banks, the federal government deregulated the thrift industry, allowing S&Ls to expand beyond home loans to commercial real estate. S&L executives were often paid based on the size of their institutions’ assets, and they aggressively lent to commercial real estate projects, taking on riskier loans to grow their loan portfolios quickly.

In the late 1980s, the commercial real estate boom turned bust. S&Ls, burdened by bad loans, failed in droves, requiring the federal government take over banks and delinquent commercial properties and sell the assets to recover money paid to insured depositors. Ultimately, the bailout cost taxpayers more than $100 billion.

Short-term incentives

The 2008 crisis is another obvious example of incentive structures that encourage risky strategies.

At all levels of mortgage financing – from Main Street lenders to Wall Street investment firms – executives prospered by taking excessive risks and passing them to someone else. Lenders passed mortgages made to people who could not afford them onto Wall Street firms, which in turn bundled those into securities to sell to investors. It all came crashing down when the housing bubble burst, followed by a wave of foreclosures.

Incentives rewarded short-term performance, and executives responded by taking bigger risks for immediate gains. At the Wall Street investment banks Bear Stearns and Lehman Brothers, profits grew as the firms bundled increasingly risky loans into mortgage-backed securities to sell, buy and hold.

As foreclosures spread, the value of these securities plummeted, and Bear Stearns collapsed in early 2008, providing the spark of the financial crisis. Lehman failed in September of that year, paralyzing the global financial system and plunging the U.S. economy into the worst recession since the Great Depression.

Executives at the banks, however, had already cashed in, and none were held accountable. Researchers at Harvard University estimated that top executive teams at Bear Stearns and Lehman pocketed a combined $2.4 billion in cash bonuses and stock sales from 2000 to 2008.

A familiar ring

That brings us back to Silicon Valley Bank.

Executives tied up the bank’s assets in long-term Treasury and mortgage-backed securities, failing to protect against rising interest rates that would undermine the value of these assets. The interest rate risk was particularly acute for SVB, since a large share of depositors were startups, whose finances depend on investors’ access to cheap money.

When the Fed began raising interest rates last year, SVB was doubly exposed. As startups’ fundraising slowed, they withdrew money, which required SVB to sell long-term holdings at a loss to cover the withdrawals. When the extent of SVB’s losses became known, depositors lost trust, spurring a run that ended with SVB’s collapse.

Silicon Valley Bank’s troubles could be the tip of the iceberg for US banks. Image: Screengrab / Twitter / TechCrunch

For executives, however, there was little downside in discounting or even ignoring the risk of rising rates. The cash bonus of SVB CEO Greg Becker more than doubled to $3 million in 2021 from $1.4 million in 2017, lifting his total earnings to $10 million, up 60% from four years earlier. Becker also sold nearly $30 million in stock over the past two years, including some $3.6 million in the days leading up to his bank’s failure.

The impact of the failure was not contained to SVB. Share prices of many midsize banks tumbled. Another American bank, Signature, collapsed days after SVB did.

First Republic survived the initial panic in March after it was rescued by a consortium of major banks led by JPMorgan Chase, but the damage was already done. First Republic recently reported that depositors withdrew more than $100 billion in the six weeks following SVB’s collapse, and on May 1, the FDIC seized control of the bank and engineered a sale to JPMorgan Chase.

The crisis isn’t over yet. Banks had over $620 billion in unrealized losses at the end of 2022, largely due to rapidly rising interest rates.

The big picture

So, what’s to be done?

We believe the bipartisan bill recently filed in Congress, the Failed Bank Executives Clawback, would be a good start. In the event of a bank failure, the legislation would empower regulators to claw back compensation received by bank executives in the five-year period preceding the failure.

Clawbacks, however, kick in only after the fact. To prevent risky behavior, regulators could require executive compensation to prioritize long-term performance over short-term gains. And new rules could restrict the ability of bank executives to take the money and run, including requiring executives to hold substantial portions of their stock and options until they retire.

The Fed’s new report on what led to SVB’s failure points in this direction. The 102-page report recommends new limits on executive compensation, saying leaders “were not compensated to manage the bank’s risk,” as well as stronger stress-testing and higher liquidity requirements.

It comes down to this: Financial crises are less likely to happen if banks and bank executives consider the interest of the entire banking system, not just themselves, their institutions and shareholders.

Alexandra Digby is Adjunct Assistant professor of Economics, University of Rochester; Dollie Davis is Associate Dean of Faculty, Minerva University, and Robson Hiroshi Hatsukami Morgan is Assistant Professor of Social Sciences, Minerva University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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FA Sustainable Finance Forum: Top Five Takeaways

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In terms of sustainable development goals (SDG), business and investment have long and difficult journeys ahead.  Sobering figures from a draft report published by the United Nations (UN) last month reveal that at the end of 2022, just 12% of the SDGs were on track to meet their 2030 targets.

“It’s time to sound the alarm,” the report warned.

“At the mid-way point on our way to 2030, the SDGs are in deep trouble. A preliminary assessment of the roughly 140 targets with data show only about 12% are on track.”

“Close to half, though showing progress, are moderately or severely off track and some 30% have either seen no movement or have regressed below the 2015 baseline.”

The audience at FinanceAsia’s recent Sustainable Finance Asia Forum on April 18 heard that although there is plenty of road to make up on the journey to net zero, so too is there substantial opportunity. 

ESG imperatives are changing the way institutional investors approach decision-making, develop sustainable products and operate within new regulatory frameworks.

While the over-arching message of the forum underlined that sustainable goals and driving yield are not inimical, how exactly institutions approach sustainable finance will shape the future.

The following are FA’s top five takeaways from a forum focussed on these frameworks.

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1. Creativity is key

While sufficient capital may be out there to bootstrap transitional finance in Asia – a region that is bearing the physical brunt of climate change – getting it where it needs to go in emerging markets (EMs) is not working at the scale and speed necessary to effect change.

Emily Woodland, head of sustainable and transition solutions for APAC at BlackRock, told a forum panel exploring the state of play of Asia’s SDG commitments that, as well as climate and transition risks, investors also face the common-or-garden risks that come from operating in EMs.

“There are the general risks of operating in these markets as well – that’s everything from legal, to political, to regulatory to currency considerations,” she said. 

“Where finance can help develop new approaches, is around alleviating risks to attract more private capital into these innovation markets, and this is where elements like blended finance come into play.”

To make emerging market projects bankable, de-risking tools are urgently needed.

“That means guarantees, insurance, first loss arrangements, technical assistance which can help bring these projects from being marginally bankable into the bankable space, offering the opportunity to set up a whole ecosystem in a particular market.”

2. Regulation drives change

As investment in sustainable development goals moves from the fringe to the mainstream, institutions are bringing with them experience and learnings that are accompanied by policy, regulation and clear frameworks from regional governments.

Institutions are being asked to lead mainstream investment in the space as increasingly, investment in ESG becomes a viable funding choice.

“The next phase, which is the forever phase, will be when sustainability becomes mandatory rather than just a choice,” Andrew Pidden, Global head of sustainable investments at DWS Group told the forum.

“In the future, you will not be able to make an investment that has not been subject to due diligence with a view to doing no harm – or at least to doing a lot less harm than it is going to supply.”

“People may think this is never going to happen, but people thought this phase (of ESG investment becoming mainstream) was never going to happen 10 or 15 years ago.”

3. China is an ESG bond behemoth

Make no mistake, China is an ESG debt giant. Assets in China’s ESG funds have doubled since 2021, lifted by Beijing’s growing emphasis on poverty alleviation, renewable power and energy security.

According to Zixiao (Alex) Cui, managing director CCX Green Finance International, in 2022, green bond issuance volume alone totalled about RMB 800 billion ($115.72 billion), marking a 44% increase year-on-year (YoY). In the first quarter of 2023, there were 113 green bond issuances worth almost RMB 20 billion.

“Actually, this number decreased compared to last year because right now in the mainland, the interest rate for lending loans from banks is very low so there’s really not much incentive to issue bonds,” he told the audience during a panel on the latest developments in Chinese ESG bonds and cross-border opportunities.

“But over the long term, I think we are on target to achieve a number no less than last year.”

At the heart of this momentum is China’s increasingly ESG positive regulation.

“Policy making is very critical because in the mainland, we have a top-down governance model mechanism which has proven effective in terms of scaling up the market – especially on the supply side.”

4. Greenwashing depends on your definition

When is greenwashing – the overstating of a company’s or product’s green credentials – technically measurable, and when is it a matter of opinion?

Gabriel Wilson-Otto, head of sustainable investing strategy at Fidelity International, told a panel addressing greenwashing and ESG hypocrisy issues, that these transparency and greenwashing concerns are often problems of definition.

“There is a bit of a disconnect between how these terms are used by different stakeholders in different scenarios,” he says.

On one side, is the argument around whether an organisation is doing what it says it is, which involves questions of transparency and taxonomy.

“In the other camp there’s the question of whether the organisation is doing what’s expected of it. And this is where it can get incredibly vague,” he explained.

Problems arise when interests and values begin to overlap.

“Should you, for instance, be investing in a tobacco company that’s aligned to a good decarbonisation objective? Should you pursue high ESG scores across the entire portfolio?” he queried.

“Depending on where you are in the world, you can get very different expectations from different stakeholders around what the answer to these sub-questions should be.”

5. Climate is overtaking compliance as a risk

While increased ESG regulation means that companies must take compliance more seriously, this is not the only driver. According to Penelope Shen, partner at  Stephenson Harwood, there is a growing understanding that climate risks are real.

“The rural economic forum global risk survey shows that the top three risks are all related to financial failure directly attributable to climate risk and bio-diversity loss,” she highlighted during a panel called ‘ESG as a component of investment DNA and beyond?’

“In fact, if you look at the top 10 risks, eight of them are climate related.”

The prominence of climate as a risk factor has consistently ranked top of the survey over the past 10 years, she explained.

“Other more socially related factors such as cost of living and erosion of social cohesion and societal polarisation are also risks that have consistently ranked highly,” she noted.

What’s your view on the outlook for green, social and sustainable debt in 2023? We invite investors and issuers across APAC to have your say in the 6th annual Sustainable Finance Poll by FinanceAsia and ANZ.

¬ Haymarket Media Limited. All rights reserved.

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Citi appoints new Malaysia CEO

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Citi has appointed Vikram Singh as new CEO of its Malaysian business, effective from May.

A spokesperson for the bank told FinanceAsia that Singh had already relocated to Kuala Lumpur for the new role, which will see him prioritise growth across the market franchise.

In his new capacity, Singh reports to Amol Gupte, head of South Asia and the Asean region, and takes responsibility for the full suite of the bank’s activities in Malaysia. This includes oversight of the performance of Citi’s Solutions Centres in Kuala Lumpur and Penang, which support its wider banking operations in over fifty countries.

Singh has served across a number of Citi’s core divisions to date. He started his career with the bank 24 years ago working across its India-based business, in posts located in Mumbai, Bengaluru and New Delhi. Most recently, he was head of Asia Pacific Regional Account Management, managing coverage of global subsidiary clients operating in the region, from Singapore. 

A release shared with media pointed to Singh’s particular expertise leading the bank’s Corporate and Investment Banking effort in the Philippines over a period of five years, during which he devised robust business strategies that went on to achieve double-digit revenue growth.

“Vikram’s long career and experience with the firm will be invaluable in leading the next stage of growth in a market that also supports many of our global businesses and functions,” Gupte said in the announcement.

Citi established a presence in Malaysia 64 years ago. In January 2022, the bank announced plans to sell its consumer franchise in four Asean markets including Malaysia, to United Overseas Bank (UOB). The deal finalised in November 2022, bringing the bank regulatory capital benefits of approximately $1 billion. 

Offering an update on the bank’s performance in the market following the divestiture, the spokesperson told FA, “We continue to see good client activity across our institutional businesses.” He noted “good growth and client work”.

Elaborating on the current opportunities that Malaysia presents, the contact pointed to varied growth avenues across investment and corporate banking, as well as within the bank’s trade and treasury business, such as hedging.

“Across our institutional businesses from Banking, Markets and Services, we see opportunities to support both local and multinational corporate (MNC) clients further.”

The spokesperson added that the bank has recruitment plans around Singh’s appointment to support client-led growth. 

¬ Haymarket Media Limited. All rights reserved.

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